BHP Group Ltd. has approached Anglo American Plc to buy the 107-year-old company. The move could trigger the biggest shakeup of the global mining industry in over a decade.
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(Bloomberg) – BHP Group Ltd. has approached Anglo American Plc to buy the 107-year-old company. The move could trigger the biggest shakeup of the global mining industry in over a decade.
Anglo American said late Wednesday that it had received an unsolicited proposal for an all-stock merger from the world’s largest mining company, after Bloomberg reported that BHP was considering a possible takeover bid. Anglo’s board is considering the proposal and notes there is no certainty whether an offer will be made. Anglo said BHP’s proposal was contingent on the company first spinning off its South African platinum and iron ore units.
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If successful, a takeover would mark a return to large-scale deals for BHP, which has revived its appetite for transformative acquisitions in recent years under Chief Executive Officer Mike Henry.
Anglo American has long been seen as a potential target among the largest mining companies, particularly because it owns large South American copper operations at a time when most of the industry is seeking expansion in the copper sector. However, applicants were deterred by the complex structure and raw material mix, and in particular by the strong South African bias.
Anglo suffered a series of major setbacks last year as prices for some of its key products collapsed and operational difficulties forced the company to slash its production targets – lowering its valuation and leaving the company vulnerable to potential bidders.
Read: Anglo American reports sharp decline in profits, cuts dividend
Anglo shares have fallen 12% in the past 12 months, giving the company a market value of 27 billion pounds ($34 billion). BHP, which operates in London and Sydney, has a market value of around $149 billion.
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It would also be the first mega-deal between the world’s largest diversified miners in over a decade. BHP and its biggest rivals have been on the sidelines for years after a series of disastrous transactions but have braced for the prospect of a deal after reassuring investors they had learned from past mistakes.
Read: BHP whets appetite for deals with biggest rivals in sight
BHP bought copper producer OZ Minerals Ltd last year. for around $6.4 billion as its first major purchase in years, but has otherwise focused on selling assets such as oil, gas and coal.
It is possible that Anglo’s now public proposal could attract other potential bidders. Second-largest miner Rio Tinto Group has also invested in copper production, while Glencore Plc made an unsuccessful bid for Teck Resources Ltd last year. which had a coveted copper business, before ultimately striking a deal for the Canadian company’s coal assets.
While Anglo’s valuation makes the company more attractive, it remains an extremely complicated business. The company owns controlling interests in two mining companies listed in South Africa – Anglo American Platinum Ltd. and Kumba Iron Ore Ltd. – and is the majority owner of the diamond mining company De Beers. It also has a long and complicated relationship with South Africa, where the state pension fund manager is its largest shareholder.
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BHP’s proposal was to first hand over Anglo’s shares in the two South African companies to the smaller company’s investors before proceeding with the takeover, Anglo said. The two parts of the proposal are “interconditional,” it said.
Anglo’s other businesses include copper, nickel, steel coal and Brazilian iron ore, as well as the legendary De Beers business.
Both companies are also investing in new fertilizer businesses – BHP is building a huge potash mine in Canada, while Anglo is developing a polyhalite mine on the east coast of England.
For BHP, Anglo’s copper assets would be the clear incentive for any deal. The world’s biggest mining companies are all trying to expand their copper production as they expect prices to rise as demand for electrification increases, while future supplies appear limited.
Anglo’s South American copper business has long been sought after by larger industry players, although the company has suffered recent setbacks and had to lower its copper production forecasts.
(Updates with additional context.)
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